Panama Refuses To Ratify Colombia FTA

Panama has announced that it will not ratify its free trade agreement (FTA) with Colombia until its dispute over the nation's import tariffs on textiles, apparel, and footwear is resolved.

Colombia levies a compound tariff on imports of textiles, apparel, and footwear from countries with which it does not have an FTA in place. The compound tariff is composed of an ad valorem levy and a levy that is based on specific item measurements. Although Colombia and Panama have signed an FTA, Colombia has maintained the tariff on imports from Panama's Colon Free Trade Zone, arguing that it is not included under the FTA.

The Colon Free Trade Zone is a major contributor to Panama's economy, but recently businesses based there have been hit by relatively high Colombian tariffs and the failure of some Venezuelan businesses to pay debts to suppliers.

Panama filed a complaint with the World Trade Organization (WTO) over the Colombian tariff in June 2013, arguing that it is higher than the maximum allowed under WTO membership terms. The WTO will issue a ruling in August if the issue remains unresolved.

The FTA was signed in September 2013. Under the agreement most of Colombia's exports to Panama will enter duty-free. For industrial exports, the tax relief will be immediately applied to 72 percent of Colombia's exports. Meanwhile, 49 percent of Panama's industrial tariff lines will be exported to Colombia duty-free. Half of Panama's other exports will enter Colombia tax-free within 3 to 12 years.

Source: Tax News